Warning over charity cash drop

Social affairs correspondent

Wednesday 12 September 2012

CHARITIES are seeing a sharp drop in income and many are being forced to dig ever deeper into their reserves to keep going, according to new figures.

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Stephen Naysmith

The annual snapshot survey of charity income carried out by the Scottish Council for Voluntary Organisations (SCVO) blamed funding cuts and low interest rates for the fact many charities are now spending more than they have coming in.

SCVO said that despite modest income growth for the larger charities and housing associations in 2011, turnover remained depressed. Smaller and medium-sized charities appear to be hurting the most. Those with a turnover of £12,500 or less had an overall income of £47 million last year, but spent £65m between them, a deficit of £18m.Meanwhile, charities with a turnover ranging from £50,000 to £100,000 a year brought in £96m between them but fell £22m short of breaking even as they spent a total of £118m.SCVO said the plight of smaller charities was particularly concerning, as 51% of those turning over £12,500 or less and 48% of those turning over £12,500 to £25,000 are in deficit.While these charities are small, they are numerous – making up 68% of the sector altogether. Overall, the income of the charitable and voluntary sector was £4.5 billion in 2011, with expenditure of £4.3bn. This represents modest growth, as the sector's overall income in 2010 was £4.4bn.However SCVO said that strong growth in certain sectors – notably housing associations which between them generated a surplus of more than £120m in 2011 – was masking a sharp drop in income for many charities.Larger organisations have lost contracts, or seen existing work cut back, while major trusts have seen income fall due to low interest returns on their investments.Excluding credit unions and housing associations, charities' turnover remains below the level it was at two years earlier, with £3.21bn turnover in 2011 compared to £3.22bn in 2009.The problems of the wider jobs market also appear to be mirrored in many charities. While the SCVO figures show staff numbers up to 138,000, from 136,600 in 2010, the number of full-time jobs fell, with more temporary contracts and a significant drop in the hours staff were being asked to work.Assets and reserves of charities increased slightly to £9bn, but again SCVO said the growth in the value of assets held by housing associations and a few large charities is hiding a "major erosion" of assets owned by smaller organisations.SCVO chief executive Martin Sime said there was a serious risk that struggling charities would be forced to close.He added: "As income falls short of expenditure, particularly for smaller charities, organisations are being forced to use what assets and reserves they have left to keep their doors open for as long as possible. With limited reserves, which many organisations already dipped into last year, charities are running out of ways to compensate for the funding drain. "Organisations are working hard to maintain the high- quality services they provide to communities across Scotland and keep their staff. With ever- growing demand set to sky-rocket as the UK welfare cuts kick in, third-sector organisations are facing an impossible conundrum. Something will have to give to secure a sustainable future for the sector."

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Charity

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Warning over charity cash drop

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